Hold Harmless Agreements for Craigslist Workers

[Andrew Earle]

On rehabs, I often go to Craigslist to find a quick inexpensive worker for demo and small jobs. I haven’t given it too much thought until recently but what type of forms should I consider to have them fill out to start keeping everything legitimate and safe. I’m starting to scale up an dI need to tighten up my systems. Should have them fill out some type of subcontractor agreement that includes hold harmless language? Is this a conversation I need to have with my insurance agent? What do you guys do?

[Sean OToole]

@Andrew Earle the advice from @Greg Dickerson was right on, but let me share a personal story that may drive home why he is right.

I had a couple of partners at one point, and one of those partners took responsibility for doing the rehabs. He had a "contractor" that he'd been working with for years, and who he exclusively used for all of our jobs. The guy had a crew, and the rates were great. Never even occurred to me to ask about stuff like licenses and insurance, as my partner had done hundreds of more flips then I had.

Well one day the contractor steps on a nail. Only reason I even knew is that he had to take the afternoon off to go get a tetanus shot, and we were on a tight deadline. A week later his foot is swollen and he can't work. Turns out he has a bone infection. All said and done, he has a $120k hospital bill. I'm thinking bummer for his insurance company, still not realizing it has anything to do with us.

Except the hospital wants to get paid, and it turns out he's let his license lapse, and he has no insurance. Things I now know we should have checked - and my partner actually knew >:-(. So now even though the contractor is trying to protect us, the simple truth is that he was working on our job, and we were responsible. So I call the attorney.

Turns out we've also violated employment laws, and we are potentially facing $250,000 in fines for our failure to have workers comp insurance. The hospital's next step is to report us. Long story short, we settled with the hospital for $60k. and only made $15k on that house. Ouch.

I've never again hired anyone without dotting my i's and crossing my t's. Sure you may save a grand here and there, but you literally face losing everything. We got off cheap. And all our guy did was step on a nail. Imagine if he fell off a ladder and became a paraplegic, or any of the other serious accidents that are COMMON on job sites.

Finally, no agreement you make them sign will magically save you from labor laws. I believe your only safe choices are 1) hire individuals directly and follow all labor laws and insurance requirements, or 2) hire a licensed and insured contractor.